SPEAKER_00: we're really excited to have claire with us come on out claire are you here all right what are we

SPEAKER_01: welcome claire what will we be talking about today we're going to be talking about china you know just as everything has been all spicy well yeah well just again we're trying to make

SPEAKER_00: today about just easy breezy topics that you know the most easiest things to manage so we

SPEAKER_11: armaments ukraine let's go to china sure uh please welcome claire hey we are going to actually keep

SPEAKER_18: this pretty apolitical today and maybe talk a bit about the parts about china that are less discussed in the highlight in the headlines and you know jason reached out and he said he wanted to

SPEAKER_20: really understand what were some some problems and i wanted to see salt that we wanted to see

SPEAKER_18: solve so i'm a property developer i run greater china for heinz we're the largest private real estate firm in the world and we have an incredible greater china team i know i see this folks in the

SPEAKER_20: front they're like where is she i can't possibly spot her in there uh so so we have a team that is

SPEAKER_18: working across beijing shanghai shenzhen donguan and hong kong and we get to work really across the

SPEAKER_20: real estate spectrum so uh we built the greenest skyscraper uh in in china uh we built some of the first international service departments uh in the country and are doing some really interesting innovative projects like in hong kong we bought a distressed hotel that we're turning into really a new kind of living collaborative living that's super technology enabled uh for a young population there where the average white collar young person it takes them 20 years of salary to be able to buy an apartment so we get to approach these problems that are not unique to our part of the world but often the solution is a combination of east meets west so back to kind of what's the the problem well you know we're sitting right now in miami a place that is super exciting thanks to a lot of the things that are happening right here that have been hyped by a pretty awesome mayor right what did he do we got on twitter and he talked to all of us about what this city had to offer it had key ingredients it had universities it had an upward trajectory it had young people looking to collaborate and at the end of the day that's where we want to be right we want to be sitting together in awesome spaces like this uh exchanging ideas with other interesting people that's how you do cool stuff and so as property developers we think you know how do you create spaces where people want to be their best right collaborate with others and build a better future so that's a lot of jargon but what does that actually mean back to the problem well first these ingredients are pretty clear i teach a class at stanford on this called who owns your city and the students usually pick it up in the first 10 minutes it's uh it's a place that has pretty good infrastructure uh can i get a job can i afford to live here and is there cool cultural stuff that keeps it from being too bland uh but then you know you'd say okay well cities can learn from each other right you can just take those ingredients and apply it and that's what suarez did a great job of here but we are living in a time where the east and west have never been more divided right and building a city building building is really hard it's it's like the most extreme version of hardware so as a property developer we spend our time really thinking about what are the big macro trends what are startups focused on uh where do they want to be because our spaces need to be relevant for 50 70 100 years and we can't pick up our building and move it somewhere else and so you try to take the arbitrage of what's working in one part of the world and try to apply that to another and solve problems and that's where you find great returns but it's also where you build places that are going to be relevant for folks and so you know just a couple examples uh up here behind me so you know we talked about the living challenges uh so for folks to be able to to be able to afford a place to buy but the concept of

SPEAKER_21: rental apartments so like multi-family if anyone lives in a multi-family building with one landlord

SPEAKER_20: that isn't totally a thing in greater china often people are left to rent from an individual landlord pay a deposit that's enormous uh cross prohibitive you know cost prohibitive and get you know quality of of product that that really is not up to what they would expect and so taking a very in some ways kind of western concept and applying it in a place that technologically is probably about 10 to 15 years ahead in terms of what that average user is used to okay they're used to unlocking a door with their phone their wechat is their id it's the way they meet new people they can physically shake hands on wechat to introduce themselves to a friend it's where they keep their coupons it's how they pay their rent it's how they pay their taxes in some regards right we don't have that in america but if you're like me and you live in greater china you do and so how do you combine those things together to create something that doesn't exist uh you see up behind me a a logistics building uh but it's actually six stories high something we're developing it is a a giant almost like a refrigerator uh but a high rise super tech enabled uh and that's because you know they've got a lot of people that

SPEAKER_21: building will be sitting within a 45 minute driving radius to 45 million people and yet china only has

SPEAKER_20: a quarter of the cold storage capacity per capita that the u.s does okay it doesn't take a genius to see that this trajectory is you know lower left to upper right and so again you're taking this concept of east meets meets west building up here uh just behind me is is in shanghai it's about a million foot

SPEAKER_21: tower you have a lot of those here in the united states big fancy office buildings you know where people used to go to sit at their computers and do work um but this one is very different from one that

SPEAKER_20: you may have walked into earlier this week this entire building is on wechat you can interact with the building on wechat you can interact with the landlord you can interact with your other tenants uh you can have chance encounters or organize a yoga trip in the afternoon with the people with the space using this digital interface so in a way it's really combining the way we live right now we live in a physical world but so much of our idea sharing our collaboration is happening in the air right in a digital experience that we can't see and so it's another combination of this east meets west and so what becomes a problem and an opportunity the problem uh when you sit in the middle of this world like my team has the honor to do uh is you see that there are all of these opportunities for us to be able to share this really the best of what the west has to offer with the innovation that's happening on the ground in china but it is so hard to talk about in this very divided world and so we like to take the positive side and say you know we're living in this world of like magic and larry and how can we make each other better so i thought i'd use just a few minutes and then we'll hang out with the besties um to to maybe share uh a story that that maybe y'all haven't read so much about so that you get the benefit of knowing a little bit about what's happening over there and you can see an example of where sort of east meets west and that collaboration can make us all better so up here is

SPEAKER_21: a gentleman you all will probably recognize this is dung xia ping famous for really the opening up

SPEAKER_18: of china and you know he was an experimenter you know he had this vision of what china could be and he saw what the importance of the physical world the physical infrastructure what a role that

SPEAKER_21: could play uh in in to enable the economy to jump further and so the picture to the other side

SPEAKER_20: is shenzhen which in 1980 was barely a fishing village that had about 58 000 people very few paved roads and dung xia ping he was from sichuan so we really understood what it was like to not be

SPEAKER_18: from the big city and so he declared it a special economic zone special economic zone so jing chi

SPEAKER_25: to chu and that meant that it would be this place to experiment with uh bits of capitalism with free

SPEAKER_20: trade etc so what is it today well first there's that same road along progression just a few years after it was declared a zone and then up here behind me is what it looks like now shenzhen

SPEAKER_21: is over 12 million people the average age is 29 uh it's really the tech hub of china uh so companies like dji which makes 70 percent of the world's drones uh they call this area home

SPEAKER_20: and uh and just within this area if you were to go shortly from where this picture is taken

SPEAKER_21: you'll have two of the world's five biggest ports by tonnage okay so how do you take that head start and turn it into something further well they took a lesson out of the book of the west and they created

SPEAKER_20: something called the greater bay area it's like the yeah yeah okay you guys get it and so what is the greater bay area well it is a collection of nine cities on the mainland side uh some of which may be

SPEAKER_21: familiar to you guys so shenzhen as mentioned and guangzhou guangzhou is about 18 million people

SPEAKER_20: uh places like juhai do you all remember you know several years ago there was this thing about china building the longest bridge in the world everyone's like where is that okay it was in juhai uh and then

SPEAKER_41: so nine cities on the china side and then hong kong and macau and together this this area it's about the

SPEAKER_20: size of called west virginia today has a gdp that's sitting right around canada and south korea okay about 1.7 trillion in 2017 they declared this great greater bay area name and and it was there to really back up a lot of the investment frankly that had already started to join these cities together to create a super region so within that super region they spent about 300 billion to build infrastructure to further connect it so within just four years they built 2 000 miles of speed rail like high-speed trains here we have like a little you know one from here that goes to fort lauderdale you know texas is going to get one in the year 2090 uh and so so what does that mean that means

SPEAKER_44: that i can walk out of my office with my teammates in hong kong which is right next to that big ferris wheel

SPEAKER_20: thing that everybody recognizes i can take one stop onto metro in 13 minutes on a speed train i could

SPEAKER_25: be in shenzhen or i could keep on going and i could access about 23 000 miles of high-speed trains

SPEAKER_21: and get to beijing get to you know further than guangzhou get to western china it is amazing and it is

SPEAKER_18: happening so quickly and that number will soon be 40 000 as they continue to build but it's not just speed trains these are interconnected nodes with further metro right with transit-oriented development on top of the meetings of these trains so back to the so what so we know that if you take

SPEAKER_21: cool people and put them in cool places and you give them an opportunity to interact well what can you do so this area again the size of west virginia now with 70 million people who are all quite young and again back to the ingredients we talked about what sort of fosters innovation well they've incentivized universities to put additional campuses here and these are the best universities in china

SPEAKER_18: so xinhua fudan etc uh they funded further life science they funded uh further tax increment zones to

SPEAKER_21: encourage businesses to come and set up nodes of activity focused on areas of excellence so remember we talked earlier about in 1980 there were 58 000 people in all of shenzhen so just between 2010 and

SPEAKER_18: 2020 in one small neighborhood on the western side of shenzhen they filed 58 000 patents

SPEAKER_50: it's pretty amazing and that shouldn't be scary that should be exciting guys this is where we get

SPEAKER_44: innovation this is how we get better back to the magic and larry right thank you yes you can clap for that you can clap for that so what does that mean for us what does that mean for folks who are sort of

SPEAKER_21: getting to work in this interstitial space in between getting to live within it uh you know up here you know behind me i have i'll clear the visual for you it's further just connecting showing these metro lanes

SPEAKER_18: these uh trams uh buses etc leading to these speed trains back down here that's hong kong island and then this takes you uh through a bit of the bay area before you get out to the rest of of china well why

SPEAKER_21: does it matter it's because these things layer together okay so china's e-commerce percentage is about 25 percent of their overall retail here it's about 14 percent again y'all are smart we can see where this is going so you can take some notes on the preview and see what things and trends may be coming here in china about 85 ish percent their transactions are mobile here that's barely 30 percent where is

SPEAKER_20: that going how does that work and you can see what's happening another is you can look at trends that are

SPEAKER_19: just part of the world there that haven't made it here and you sit there and you're like wow what a

SPEAKER_24: chance to iterate so the example there again we'll stick with with shopping and retail is

SPEAKER_20: social shopping so this idea of streaming while shopping that's layered with a full experience and imagine what it can do and again if you layer that on top of this wechat platform we're just talking about a place where i can go and i could make a new friend right now you by looking at you showing my phone to you putting them together so we can introduce a product introduce a lecture a concept together imagine what we can do elon likes wechat he was just talking about it yesterday

SPEAKER_44: so the point is uh that we all have this opportunity um to really you know again the headlines can be exciting they can be crispy um but to look beneath them and to take an opportunity to further connect

SPEAKER_21: with the people because again those folks who are hopping on these trains for you know probably the equivalent of about 45 cents right to get on the public transit here going around and exchanging ideas these people most of them are not politicians right most of them are not big world global leaders they're folks who were trying to to create something for themselves to create something for their children to build a better world right so we're really all on the same team so with that bring the

SPEAKER_56: besties out i guess try not to get too spicy all right center stage for you right here right there in

SPEAKER_59: the middle seat oh baby well done well done um be nice guys be nice of course well uh sax isn't here so

SPEAKER_00: of course we'll be nice um that's kind of by default uh and meet uh our uh ryan peterson from flexport

SPEAKER_63: claire maybe you guys uh ryan clare ryan i'm introducing you two guys claire ryan ryan clare

SPEAKER_67: we follow each other so

SPEAKER_69: what do we as americans not understand about our rival and what does our rival most not understand about us in your estimation having operated in both countries for so long you know the term rival

SPEAKER_73: is an interesting one obviously i love sports analogies and came from the track and field world myself claire was in the olympics guys claire was injured claire was injured i used to go running

SPEAKER_20: sometimes kind of fast at the olympics but you know your job in the sport is to find the person who is better than you in some ways uh and maybe they're strong where you're weak you're weak where

SPEAKER_44: they're strong you find each other and you you shore up together and i think that is what becomes so

SPEAKER_18: clear when you you know live there when you live on the other side of the world um but maybe we're born here or uh you know i you know i'm a minority so i've maybe always lived in that interstitial space personally uh or even our team our team is very representative of modern china we have people from nearly every province they're really across the uh the education bracket highly trained engineers but who might be quite young uh to folks in their their 60s who have really seen china evolve and so i i do think the thing that can get uh missed is almost that concept like we talked about that

SPEAKER_21: as quote rivals you know they're not monoliths just as america is not a monolith right and we can take

SPEAKER_03: the best of each other so we're we're best of rivals in a way there we go is there a model for

SPEAKER_89: the century for cooperation between the two nations that's enhancing to both i think it's happening in

SPEAKER_18: enterprise i really think it is so when i look at again younger people um the products that they use or the things that the young tech uh you know entrepreneurs in china are working on versus here they're they're approaching a lot of the same problems right so on the social side uh uh you know looking at doyun and what made it so catchy right and what it is for us yeah it's tiktok it's

SPEAKER_20: tiktok and back to that one about you know cheat codes and a preview uh you know doyun was popular

SPEAKER_44: years ago and uh and so you know i remember first looking at the at the app and being like wow this

SPEAKER_20: is very catchy and there's effectively no difference between do you read and write mandarin fluently

SPEAKER_18: as well as speak it or well you will never confuse me for a local but you know enough to get by and so

David Friedberg: when you do business in china do you conduct it in english or do you conduct it in mandarin yeah so with

SPEAKER_18: the team we work fully across what's appropriate because we also work in hong kong where it's

SPEAKER_21: cantonese right but all of my communications that go out to my full team everything in full team is in mandarin uh we do have a large part of our team that only functions within mandarin um so when you're

Chamath Palihapitiya: for example like you know you showed some of these buildings and the idea that came to me is this is a massive coordination problem that's almost impossible in the united states which is if you have this idea of like this living breathing monolithic building that is connected via the internet it'd probably be 50 organizations in the united states that would have to have a say or want to say the perception that we get is there is a individual that can effectively make that right decision in china whether it's at the city level or at the state level is that how it's really like like when you guys have super ambitious ideas is there one place you go to and then it just kind of

SPEAKER_44: all gets decided or is it just like here where it's messy so it's kind of neither actually and and this

SPEAKER_18: is where i think it takes the the best of both which is at a local level so you have you know a local we have a party secretary you have a block leader and and ultimately it goes all the way up to you know the the big guy um but china does this amazing thing they have a five-year plan they call it the five-year plan last year was the 14th five-year plan and it sets kpis and areas of focus for the entire country and those are things around carbon neutrality education agriculture seniors agriculture industry and it's a lot like you know for you guys who are running companies setting goals and how are you going to get there what's the roadmap but that filters all the way down and so at a local level those kpis for the local leader uh are you know how did you make your district greener how did you increase revenue from higher quality services and technologically advanced companies like what happens if you don't achieve

David Friedberg: it like you get fired you get kicked out of the party like what is the mechanism of reward yeah or

SPEAKER_20: well it's quite high accountability and so if you perform very well within that system as a leader then you can move to higher and more advanced posts to a bigger city becomes a right so yeah so from a

SPEAKER_50: from a block to a bigger city to a higher you know up to a uh so your career stalled out if you don't hit

SPEAKER_18: them but it gets accelerated if you exceed right and so that creates a very interesting set of opportunities and so to put it to maybe a tangible example uh is so for the things that you know are really great for communities like park space or building a building that's green uh the the last building that i showed up there is right sits right on top of the metro and is next to a natural history museum and we needed to work with the local government to ensure that we were relating to the area properly creating like leaving it better than we found it um you know we look at projects where you can't do the project unless you show that it's going to be green and additive or restore historic buildings in the area there's a real handshake there that i firmly believe creates better outcomes i know

SPEAKER_114: our team would say the same thing claire what what's going to happen with the capital markets for your business with evergrande and like some of these big kind of property developers that have had

SPEAKER_117: major debt problems and have you seen that already flowing over and you understand the market very well you probably are able to navigate this but the foreign capital and other investors like might group everybody into the same block and get scared off sure sure so certainly we get a lot of questions

SPEAKER_18: um but it's another one where the the headlines out versus in you know inside the country certainly um the the built environment the construction and the real estate industries if you combine that all together you've got about 27 percent of the economy um if you include the full integrated stack one of the things in five-year plan is to diversify away from from that in a way uh but is you know evergrande and the other developers um the real focus at the local and the higher level is to help the regular people uh get good on their deposits and ultimately get the homes that they

SPEAKER_101: were promised so it's very interesting for developers uh like us and acquisitions people as for some of

Chamath Palihapitiya: those smaller developers who got into trouble has there been a bailout is it is that is that the wrong word the way that it's been characterized in the u.s media that the chinese government had to step in shore up the balance sheet make sure evergrande wouldn't default on some of their their i think there

SPEAKER_18: was a concern that there would be an entire meltdown of the full chinese economy which is not what we feel on the ground and i think if anything it's created a set of opportunities to really level

SPEAKER_101: set especially on the living sector um it's really accelerated some policies to make it easier to to build and to create rental housing um which creates more access which therefore maybe takes away some of the pressure on the condominium system um you know they're uh for for the debt markets to create a space that is uh maybe taking on projects that are you know appropriate for the system um a little bit again more diversification and development in the right places in the right

SPEAKER_127: markets when we look at um the relationship between the united states and china we've had three

SPEAKER_69: four five hundred million people come out of abject poverty on the planet because of this great engagement i don't know if that's a term but i'll call it the great engagement we started using their factories we started making iphones there this has created despite all of the hand-wringing about the relationship and all the various issues on both sides um a lot less suffering in the world absolutely and so there is something that i think we don't recognize sometimes is that people who are living for under a dollar a day three or four five hundred million of them are now gone um and and that leaves some areas in africa and southeast asia that we still need to do that work um which paradoxically or ironically it seems like china is doing in africa what i'm curious about is what you're seeing on the ground with their middle class which to me seems analogous to what we went through in the 30s 40s and 50s this establishment of a middle class which then established you know um education and prosperity for for the decades to come and specifically for the boomers and gen x um so so tell us about that middle class that's emerging we hear about it yeah but how many of them

SPEAKER_131: are there and qualitatively what do they want from life yeah well jason in a word it's incredible

SPEAKER_44: right like again i i talk about infrastructure so much because you you see it up there right china's only as urbanized as the u.s was in about 1950 so we read a lot about these today today so we read a lot about these bullet trains right and so that leaves this incredible consolidation of people to cities and younger younger people to cities it's a demographic you know spark that that maybe gets

SPEAKER_20: talked about a little bit less but also if you look at the change that that person you're talking

SPEAKER_44: about has seen in their lifetime so they went from a you know rural lifestyle frankly most of them um and something of a village setting that had not changed in decades to this future world that in many ways can only be imagined in in movies and so i think you know i i sort of struggle to put it

SPEAKER_18: into terms because he asked you know what what do they want what are they looking towards and i'd say

SPEAKER_20: you know to use a personal example right i'm the luckiest girl in the world i get to live in this amazing place and work with this incredible team and you know yet you know my parents you know graduated in a fully segregated world the elder people when they were growing up were not just slaves they were the slaves that we talk about on juneteenth the ones in galveston who walked across the bridge and

SPEAKER_25: followed railroad tracks to houston texas right that's amazing that is amazing and so i think when a

SPEAKER_20: generation or a collection of generations sees that amount of change what they want is first of all

SPEAKER_50: they're grateful but what do they want they want to be able to build and create and be people themselves

SPEAKER_137: yeah i have a question japan in the 80s had a moment where everything came together for that country

Chamath Palihapitiya: great population growth great economic growth great systems like kaizen and all of this other stuff that they would export and the headlines in the 80s was japan was taking over the united states or japan was going to lap the united states but really one of the biggest things that it had working against it

SPEAKER_137: was a demographic wave right and you had massive negative birth rate that has really compounded

Chamath Palihapitiya: japan's stagnation china is on the precipice of this because of this one china policy i think the the

SPEAKER_137: stat that i saw which is stunning is there's 1.2 billion people in china 1.4 by 2100 it's going to be around 600 million if that's true the point is just like there's just there's a real issue yeah um is there something in these five-year plans around how to become sort of more culturally integrated with the rest of the world you know meaning how do you use immigration as an example to subsidize some of the negative birth rate do you teach english more so that you're more integrated

Chamath Palihapitiya: into the world economy all of these things can you just talk about that

SPEAKER_141: so first i think the the urbanization trend of folks consolidating to the cities really can't be

SPEAKER_18: overstated um just in the way that it shifts sort of how how the country will work and what's happening

SPEAKER_21: on the ground um you know it's still relatively early days but when we look at things like belt and road you know as i walk around beijing and i compare it to you know when when we first started there or when we were working with capital partners there i see a lot more brown faces really going to the universities around beijing now these are still what belt and road is for folks who maybe haven't heard the term yeah yeah yeah so many places you guys can read about it and before i forget

SPEAKER_101: talking about so sort of just i know everybody loves recommendations here so if you haven't read dalio's latest book on changing world order or there's actually a great you read it

SPEAKER_152: freeberg talked about it every podcast for the last 20 years so you've got to read it listen to

SPEAKER_153: your besties uh there's also a very good uh very good illustration of it as you guys have talked

SPEAKER_18: about um but you do do read that because you know china has been a major participant in the global south so you know the short version of belt and road is uh working really across a set of countries around southeast southeast asia and africa bringing in uh infrastructure and kind of what it sounds like roads uh roads ports airports um etc really building out this network for that part of part of the world but i think what gets sort of bumped over on that is uh again things like like this so folks coming to china to be educated the number of folks on the african continent now learning chinese and again

SPEAKER_101: i think this is something that is exciting at the end of the day uh the opportunity to to further exchange to lift more people out of poverty to create further infrastructure and claire i was

SPEAKER_69: hoping you would stay with us and be a bestie for ryan who's the next speaker would you be willing to

SPEAKER_158: help us interview ryan i would be honored you want to switch seats no no there we are oh yes switch

SPEAKER_162: sheets okay yeah you'd be better get in now you're the guest team um i like it i like it

SPEAKER_00: um uh so give it up for claire um now ryan congratulations um cnbc does their top innovator

SPEAKER_69: of private company awards um every year and you made it to the top 50 list today i didn't check which ranking you got but being on the list in and of itself is a big win what do

SPEAKER_166: they call it disruptors list uh disruptor 50 and my view of these lists is you should never share

SPEAKER_168: any list about your company unless you're number one and we were number one this morning so

SPEAKER_173: you truly helped us navigate i think um the the challenge of us as besties and the audience

SPEAKER_69: understanding supply chain we appreciate that you've been on the show twice i think or one just once

SPEAKER_168: apart just once apart and then here this is your second time and uh apologies i was uh filming the interview for that during uh palmer's talk this morning you missed nothing i don't know what i missed nothing much happened but when uh palmer and i woke up this morning we're writing our speeches together and deciding you know what we were going to say oh do we do do you have some feelings

SPEAKER_182: you'd like to share with the class seems to be a theme i mean this is turning into therapy

SPEAKER_185: uh no i don't have any i have some emotions it's no enemies i got i got nice things about people jake

SPEAKER_187: i got covid i couldn't think of a single person who do i want to give this to i was like i like

SPEAKER_189: everybody i don't know um so um tell us he was going to do a talk right are you doing a talk for a couple minutes well he's going to talk from there yeah let me share a little bit about what

SPEAKER_190: we're seeing um so uh first off what flex board is is we're a global logistics platform we help

SPEAKER_192: uh businesses of all sizes ship products all over the world from anywhere in the world to anywhere

SPEAKER_117: else in the world we do a lot of business in china um probably about half of all of our volumes uh come

SPEAKER_194: out of china i know a landlord if you're looking for one ryan just if you need to ship something we'll

SPEAKER_168: do some business after this um and so we see a lot we're sort of like a front row backstage pass to

SPEAKER_192: the world economy of what's really happening and unfolding um and it's been a crazy few years we

SPEAKER_196: to give you a context of flexport started in um 2013 first revenue was in 2014 we did two million

SPEAKER_192: dollars in revenue that year we're on track this year to do five billion dollars in revenue so from uh very exhausting yeah and um this time period is i assume it's always like this in this industry i have only been in the business for about eight or ten years here but uh just to take you through

SPEAKER_196: that timeline uh in 2015 there was a port strike on the west coast and you couldn't import anything into the united states for like three months um total pandemonium by the way that might happen again july 1st their contract that they negotiated back them is up for renewal on july 1st so we might

SPEAKER_192: talk about that uh 2016 there was so much excess capacity of ocean shipping oh so many extra ships

SPEAKER_196: were purchased that the price of ocean freight hit the lowest in all of human history it was like six hundred dollars to ship a container this past year was 20 000 bucks from 2016 so we go through

SPEAKER_192: these boom and bust cycles it's an asset business that'll happen uh 2017 18 and 19 our president would launch a new tariff war every couple of months and you couldn't predict anything uh 2020 a pandemic

SPEAKER_196: hits you couldn't ship anything for a couple of months out of china where like they were really hard zero covid shut down factories shut down all the purchase orders everyone thought the great depression was coming canceled all the purchase orders then it turned out the opposite happened it was this crazy boom and you couldn't import anything because the ports were overcrowded it went from in 2019 it took about 50 days to ship a container from like when the goods are ready when the factory raises their hand and says hey come and pick up these goods to right now it's about 120 days so doubling or more than doubling the transit time um and it is just incredibly hard to operate in this environment if you're trying to run a business and so we've we've had to learn how to navigate through chaos as flex board it's like we kind of welcome it at this point um we found that it's probably it might actually be good for our business we try not to talk about that because it's so bad for our customers and uh it's been hard to fulfill the customer promises but if you put yourself in the shoes of those customers so like a direct-to-consumer e-commerce business and we ship for probably 80 or 90 percent of the hot new ddc brands um a lot of ipos

SPEAKER_192: recently a lot of a lot of really cool hot new brands they're going through a almost a perfect storm right now uh in in like a really really bad way like the movie the perfect storm um because ocean freight rates are sky high mention this 10 20 000 to ship a container rule of thumb long term is like

SPEAKER_196: two grand so really really elevated cost walmart announced really high costs this morning and so it's not just small companies but walmart announced their costs were through the roof from supply chain and their stock fell 10 today wiping off 40 billion dollars of market cap this morning um so so it hits companies of all sizes but these ddc brands got a double whammy because apple last what i think was last year when they changed their privacy rules and their customer acquisition models are on instagram facebook facebook all these things stopped working and so you at the same moment your cact it stops working you can't acquire customers your supply chain costs are through the roof uh and then add to that the consumers are now starting to come back to conferences like this going back to the restaurants and the clubs and doing the travel and during the pandemic everybody just bought stuff uh you got to get your dopamine from somewhere and everybody was just buying

SPEAKER_192: goods so that uh it's like a triple whammy for these companies i'm incredibly worried about

SPEAKER_202: the whole d2c brands the whole d2c space the d2c space is just anyone in physical goods you saw it in

Chamath Palihapitiya: like the i think it was thrashio that just announced they're laying off 25 percent of their

SPEAKER_173: thrashio was buying a collection of those amazon d2c brands putting them together and trying to have some economies of scale yeah but when your supply and your demand both get 10x in the wrong direction

SPEAKER_206: it's game over it's i don't know if it's game over but it definitely changes the rules of the game

SPEAKER_208: the reality is look people are going to buy stuff there are going to be successful there are going

SPEAKER_210: to be some winners are going to be brands that survive though at what price well so you're so you're saying that your thesis that you're making the statement that you're making today is hey we're seeing real significant risk to d2c companies because of this confluence of issues right now and this could be a big threat to a lot of businesses particularly in a in an environment where venture funding is

SPEAKER_212: i think yeah venture funding oh my gosh triple storm capital markets are driving capital markets

SPEAKER_114: public and private investors like you all will look at this and go hey maybe i you know put more

SPEAKER_216: into sass but he said it's just easier to not do anything it might be easier to not do anything so

SPEAKER_192: what does that mean how do you manage this and um fundamentally one of the problems that's that that comes about in all supply chains it's been written about um the famous phd paper from like

SPEAKER_196: the 60s or something called the bullwhip effect and a bullwhip if you like crack a whip the end of that whip is moving incredibly fast um and it's it's a bit like that in supply chains because you have imperfect information and so the people doing demand planning are living in one system they're selling goods they're looking at this data set the people producing stuff it's on a different system uh how long is it taking to produce things that's getting longer the transit time is getting longer

SPEAKER_192: this data is living across all these different domains and becoming very very hard for a brand to make a decision how many goods should we buy when should we buy them so how much do we want

SPEAKER_207: to have in stock how do we avoid being way over stock yeah and then not and what we're seeing right

SPEAKER_220: now is these warehouses are overflowing and uh people can't so what changes that like what breaks it

SPEAKER_20: open so you know like in china penduoduo didn't exist in 2015 now 800 million plus right users but it was technology that broke it open like what's the breakout moment to solve this exact problem you're

SPEAKER_196: talking about i mean actually china's got one of the companies to watch is um shane uh s-h-e-i-n it's this chinese uh kind of like the new zara that uh is taking over the world i think they're going to do 20 billion dollars in revenue this year fast fashion fast fashion they're launching a thousand skews a day a thousand new skews a day all like ai generated and then if people ordering

SPEAKER_207: up yeah they produce it and it's like a really incredible what you're saying a robot says make

SPEAKER_225: these skews this is where this shirt is from actually no way you're sure i kid you not yeah see

SPEAKER_228: and it but now it's going to be a million of them to be ordered after this sorry tell us so wait sorry

SPEAKER_18: this shirt you so it's literally a shirt from shien but but yes so if zara so zara is seeing something on a runway determining that that trend will hit and then they can have it in stores i think within like eight or nine days something you know pretty wild uh shien's about as close to

SPEAKER_46: instantaneous as you can get so very fast moving skews it's sort of hyper speed fashion so they can have

SPEAKER_231: kind of like pre-com almost on the same day like for minority but they're predicting that this puffy shirt is going to be like women are going to want to go for pirate but it's a fly shirt it's fly as

SPEAKER_196: fuck i agree and and i think one of the one of the key things here is is that the transit time of how long does it take you from when the thing is made to when it gets to the customer because if it stretches out the way it has right now in ocean freight market where it's taking forever if that takes three months four months five months might not be fly no more six months all of a sudden

SPEAKER_192: you've placed these orders and then the demand went away because people started going to nightclubs instead of buying their gardening equipment and so the tighter you can make that and it does speak to spending a little bit more on logistics where where you know traditional procurement person in logistics only thinks about like i'm just gonna buy the cheapest freight i can ever buy because they

SPEAKER_196: don't understand that your goods in transit are just money that's taking a different form for a period of time and money has a cost to it and if you're sitting there on six months it's already expensive because you know you've got to pay interest on that there's opportunity cost what else could you do with the money but now that cost has gotten much worse because by the time the goods arrive maybe nobody

SPEAKER_117: wants them um you saw that with christmas where you know you import christmas that's the classic thing you import christmas stuff and in january it's worthless what price do people just find

Chamath Palihapitiya: alternate ways whether it's you establish domestic 3d printing or you buy a fleet of planes or like there's got to be a work because like i saw this image i think maybe you tweeted it of this entire massive traffic jam basically trying to get the ships even into china because the covid 19 lockdowns

SPEAKER_137: are so strict but that's also exacerbated all of this but and and last year walmart didn't they

SPEAKER_210: announce they're spending 10 billion dollars verticalizing their supply chain and building out their own

SPEAKER_244: infrastructure for moving goods you've seen a lot of companies do this uh much easier said than done

SPEAKER_196: yeah um you've seen at least a few of the big box retailers walmart i want to say home depot costco a number of these guys have said hey we're going to charge target was the other one maybe target um

SPEAKER_197: amazon of course yeah go charter their own ships go solve the problem their own way um it's really hard

SPEAKER_117: to do run these things at scale and operate it looks good at the powerpoint slide uh hit you know when when you have to get down to it it's really hard so is there a big capex play here ryan for the

SPEAKER_210: next decade i think um like a big capital equipment hard asset play so the world's ocean carriers that's

SPEAKER_196: what we call the people that are on the ships have actually ordered 25 percent more ships they

SPEAKER_252: increased the fleet by 25 over the next three years wow so it could be ugly the other way real quick

SPEAKER_186: you have too many ships and nobody you know the ship owners can't make any money happening in mining i mean

SPEAKER_137: like it's a similar sort of but anyway ryan ryan said it best the problem is you can't forecast demand accurately for these long lead time categories that are highly capex intensive so whether it's mining or

David Friedberg: whether it's chipping how do you make a 500 million dollar capex decision for a business demand cycle

SPEAKER_210: that's five years into the but they're all taking they're all taking profit hits and saying we have to make this investment because we need the security we need the redundancy i mean walmart did it right they were optimized to to a t also the way and then all of a sudden it's like hey that optimized system

SPEAKER_137: doesn't work look the way that mining for example deals with this which is really interesting is they get these companies to sign up what's called take or pay agreements right and so they can actually smooth out the demand curve five or six take or take or pay means i'll do a deal that says okay i'm going to rip the lithium out of the ground you take it or you pay for it i don't care what you do right but i'm going to get the revenue assurance i need to go to wall street to get the money we've

SPEAKER_168: started to see those signed for the first time so we've signed three-year contracts flexboard was the first ever to sign a multi-year contract where we commit we will pay for this rate whether or not uh whether or not we ship anything we're gonna we're gonna pay up front yeah okay take or pay

SPEAKER_192: um and and you asked a little bit air freight what's gonna happen there well remember uh 50 percent of all the world's air freight flies in the belly of passenger planes and there's way less

SPEAKER_196: people traveling to and from asia than there were is that right yeah 50 percent of the world's air freight which is a little scary when you think about like what's under the belly of that yeah is

SPEAKER_207: that getting scanned uh it is it is there's there's good controls on that but uh but you never know it's always yes jason it's getting a little nerve-wracking um so and he seemed to be not so

SPEAKER_181: sure uh you know you work in any industry long enough you start to question uh whether everything's

SPEAKER_196: perfect um so we've actually uh got 10 passenger planes that we've leased and we'll we'll keep doing more that are not flying any passengers we're just filling them with freight we started doing this

SPEAKER_192: in the pandemic there's seats in them flying masks are there seats at the top there's still seats in

SPEAKER_16: some of them some we've ripped out the seats it's like castaway you know you got the big plane

SPEAKER_187: yeah basically if you want to go to asia i've got a 787 just nobody on there could be a private

SPEAKER_18: flight just you but exactly this is why you've seen the rise of logistics real estate as a deeply institutional asset class because that math that you talk about the algorithm determining what is ordered how long will it sit and how fast do people want it that takes an infrastructure on land to

SPEAKER_192: be able to get it to people and coming back to the question about assets is there a play here probably yes because most of wall street has been trained they've gone to all the same business

SPEAKER_269: schools and everybody's been trained that like assets are terrible get them off your books don't carry

SPEAKER_272: them don't this is what happened with oil and gas you know going into last year and everyone missed

SPEAKER_192: it you want to be asset light it's still the trend and and almost everywhere until somebody like tsmc comes along and says you know what you don't want assets intel like fine we'll build the fabs

SPEAKER_247: another 400 billion dollar company because they're willing to have assets totally on the books but

SPEAKER_245: it's a different investor and now they have the power in the equation and they can they can get a better uh share of value and i've been you know i've been answering this question blockade around

SPEAKER_269: that's that's the real estate business the hardest question for me to answer and i i know that there's some entrepreneurs out there who have the same question anytime someone asks me is flexport a

SPEAKER_276: software company or a logistics company are you going to own assets or not own assets yes and

SPEAKER_196: you know i think the correct answer is to ask the investor which one they'll give you a higher multiple for and then just say that um try to try to figure out who you're talking to but it is on some level you know maybe another answer is like kind of buddhist dualism like you can't do logistics

SPEAKER_280: without the tech you can't do the tech without the logistics i think you're bringing up something

SPEAKER_137: which is that today the problem with the capital markets is actually that it is very balkanized so meaning you know let's just say you take a company public like yours the problem that you'll have in the public markets is that there are folks that you'll go to in that room that understand sas software understand margin structure of a software business etc and then there's folks over here who run the industrials business and folks over here who run consumer the problem is those three folks don't talk they have three completely different conceptions of what a good business is and the problem for you will be and i'm not forecasting this for you to be correct is that you can get orphaned in any one of these groups and now all of a sudden the capital markets could be totally shut for you this is a very important point that you're bringing up the the thing that i think we need to change is like the capital people that control the money flows do need to have a little bit more of an open mind sure it's true that you'd love a 90 gross margin business but it is also true in the tsmc case you'd rather have a business doing 20 on 500 billion dollars

SPEAKER_166: well and if we look you know we also have some examples of amazon the market seems to have worked out

SPEAKER_173: this business that's very factory and asset heavy in delivering goods to us and you know the cloud

SPEAKER_137: business even amazon like look amazon got escape philosophy on less than you know a billion dollars of invested capital the problem is you know if ryan for example decides hey i'm going to go and actually vertically integrate and buy an entire fleet of ships that's probably a 10 to 20 billion dollar capex cycle over 10 years and you think about replacement costs it may make a ton of sense

SPEAKER_285: actually right i wonder when amazon's cap expenses for those servers started to hit

SPEAKER_287: he's thinking about it he's thinking about it but giving the capital markets a little boy in me definitely wants to do that but i don't think you want to own a fleet of ships you already own a

SPEAKER_207: you have a bunch of these planes but no we're not going to do that i don't think um i you know

SPEAKER_196: there's two plays you know fundamentally your bullwhip effect means the data can't flow and people can't make decisions optimally because the data is trapped in multiple places you don't know how to run an efficient supply chain because you don't know how many trucks do i need when the

SPEAKER_192: ship arrives like actually even not even like long-term demand for forecasting how many ships but like literally that ship is going to arrive how many trucks should i dispatch when should i

SPEAKER_196: dispatch them like there's two ways to solve this problem one is to own the asset and the other is to create a data network effect such that the asset owner benefits enough from putting it on your platform your machine learning your op your algorithms are helping them make more money from their asset they want to tell you or you can invest further down into the chain i mean one of them is

SPEAKER_297: a lot hopefully simpler and don't need to manage as many people and life is easier if you can solve

SPEAKER_18: the data machine learning problem sorry look to alibaba and alibaba investing down into china like there is a middle road of being able to go to china so logistics warehouse i mean as stupid as

SPEAKER_173: it sounds you having purchased a shipping company and putting it over here to your point claire and saying here's the little thing we bought it's a bunch of ships it's its own balance sheet and then here's the really great business but we have this little subsidiary over here is a potential middle

SPEAKER_301: ground it's what makes flexport fun business there's like a million strategies and ways to play

SPEAKER_192: out and i'm not a big believer in like predicting the future and you know you want to have a vision and know where you're going but i think be sort of flexible yeah in that what's in the name we talk about our culture a lot what's the goal of what's the goal of a company's culture um and elon talked

SPEAKER_196: about the goal of a company the purpose is like hey we've got to create valuable products and services for fellow humans right uh but the goal of your culture is how do you maximize your velocity in that direction and and velocity is a really important word because we forget a lot like normal people forget that velocity is different from speed yes if you remember your physics velocity has a direction you got to know where you're going and sometimes going really really fast is actually negative velocity because you're going the wrong way and so how do you stay agile the world's going

SPEAKER_247: to throw all kinds of chaos at you be nimble be able to change like we don't know exactly the

SPEAKER_166: strategy i don't have everything as we wrap here um question for both you and claire um which is

Chamath Palihapitiya: uh china has big before you do your wrap question can i just can i ask him to can you tell us the audience about what you did during the uk crisis um oh this is beautiful it's just just like 30

SPEAKER_192: seconds about you know i didn't go there like antonio the crazy man but um what so uh we started

SPEAKER_196: this group in 2017 called flexport.org to do humanitarian relief shipping uh really at that time the crisis was syria and china help uh refugees it was really a simple idea it's like look we got all this stuff here we know they need stuff at the refugee camps what if we shipped it there uh seemed like a radical idea we we maintain a database of partners so we have agents that we can operate on behalf of flexport in over 120 countries and at that time i simply emailed our syria partner who was literally based in aleppo where a lot of this destruction was happening and i emailed i said hey we'd like to ship a container to this refugee camp down there and he was like sure what's the address where do you want to ship it and i was like wait is that easy like i thought this was like and i realized you could do that and we didn't ship into syria because we didn't know who was going to end up in so we shipped to refugee camps in turkey and jordan um so we've been doing this now for five years shipping to over 50 different countries any kind of anytime there's a hurricane uh earthquakes but uh we're a war um and so when we saw this happening in ukraine we immediately kicked into high gear uh the flexport.org team has about 12 full-time people and then we have a model where employees at flexport can surge onto that so we've had about 60 people working on this uh in this case you know usually we offer pro bono shipping because we the shipping is expensive uh we can't just eat the full cost we are profitable but not enough to really solve the world's problems all by herself so we created a uh go fund me campaign partnered with uh ashton kutcher and mila kunis ashton's an early investor in flexport uh and we raised 25 million bucks to pay for shipping uh to deliver goods yeah thank you well and the way you did it so ashton and all of our investors a lot of great

SPEAKER_166: people stepped up you emailed the besties and said hey um it's forty four hundred dollars a container was that the number 42 or 44 it depends on where it's coming for Ukraine specifically i mean for

SPEAKER_207: example we shipped nine ambulances from uh gibraltar into ukraine i thought we wouldn't be able to ship

SPEAKER_196: into ukraine because it's a war zone uh it turns out most i don't know most but a huge percentage of european truck drivers are ukrainian and they were just like stoked to go and do this uh so i so we

SPEAKER_315: delivered nine ambulances that cost like around 10 grand yeah so punch i delivered nine ambulances i

SPEAKER_166: replied back to him and i said no problem and he said hey mention on the podcast i said no problem and i donated a forty four hundred dollar container and then chamat said oh i donated the plane

SPEAKER_206: that 12 containers went on he did so it was a flex on a flex for flexport it was like a multi-layer

SPEAKER_192: flex so and then um it just snowballed and this hasn't gotten much attention but yuri milner who's an early flexport investor just donated a hundred million dollars wow to yes uh you're really putting

SPEAKER_324: pressure on their side of the stage i didn't hear the last part

SPEAKER_192: everybody does what they can um and it is an amazing model where but by the way over 60 000 people donated a little bit and i'm almost as just as proud of that it's like people are getting

SPEAKER_69: involved stepping up hey you can do something dot org flexport dot org yeah final final question for you two um we had this great moment where you know we engaged china we built a bunch of iphones amazon basics you know whatever it is nakey shoes um and it and it raised um you know the standard of living for a lot of people we understand china is doing this now and they're doing it in africa and some other places what are you seeing in terms of that relationship how china is looking because towards other countries to become uh producers of goods and and and they're kind of now uh becoming incredibly influential what's their intent and how is that going claire maybe you could start that's a big

SPEAKER_335: question um but i think it's it this is a long-term play we're all in this for a long-term

SPEAKER_18: right play and whether you know you take maybe the the spicier view around you know resources and protectionism uh versus one that's more just around progress and as we may have an increasingly balkanizing the east and west um the ability to their for there to control the bigger piece of their own supply chain but the end result as you're sort of saying is you look at places like niger right the average uh mother there is having six children we have a very young global south um and the important thing is that they're fed they're clothed and that they have an upward trajectory and so that's

SPEAKER_69: people living in abject poverty will probably end in our lifetime uh you know the only places it won't end is in places with dictators what are you seeing in terms of the the shipping containers because you must see shipping containers increasingly leaving certain ports where is china sort of exporting production too and and what are the up-and-coming production areas you know there's some really

SPEAKER_168: interesting trends going around around labor costs uh in china the reason people went there over the last 40 years to be honest was like cheap labor uh and and but over time they became

SPEAKER_196: quite sophisticated they really learned how to manufacture things especially electronics they're if you want to make electronics you pretty much have to make them in shenzhen the greater bay area as she called it um so and that's but stuff that's just for cheap labor because that's no longer about cheap labor this is a whole supply chain ecosystem of components and other things and if it's just cheap labor two years ago mexico uh became cheaper than china in labor costs wow which is a huge shift and now mexico doesn't have the manufacturing capacity they don't have the skill sets they don't but they'll build it you know and and people will respond to that trend uh as long as it takes 120 days to ship stuff from china to the u.s and we can't get this sorted out brands are going to respond to shipping closer to home um so you're that is a trend that you're going to see more and more of uh if the delays stay the way they are um i think china's big challenge is if if they become labor costs too expensive how do they keep moving up the value chain and this is what they're made in america made in china 2025 thing is like we've got to they've got to make more and more sophisticated products because it can't just be about dirt cheap labor like weight disturbances and yeah and that that's a huge challenge and in very few if anyone's really done it at no one's done it at that scale because they're the biggest country in the world but

SPEAKER_166: japan korea have kind of done that but not 10 times india as well bigger moving to a services based economy india with it comes to mind and then they'll become entitled and want to retire at 55 like you're up and i oh by the way my favorite answer is someone that um i think it was zuck

SPEAKER_196: although toby from shopify told me he's lifted this line his employees were asking him about the four-day work week and he was like well you know if i do think we should do some experimentation around how many days a week we work so but we're gonna start with the six-day work week like china does

SPEAKER_276: and then we'll try the four-day work week later uh ladies and gentlemen please join me in thanking thank you

SPEAKER_346: well done